Home Products International Inc. plans to boost its storage container stake by acquiring two major players in the business.
The Chicago firm said Aug. 3 it will buy Newell Plastics and, separately, Tenex Corp.'s consumer storage line. The companies have annual sales of $70 million and $25 million, respectively. The housewares deals will boost Home Products' sales by more than 40 percent.
``Home Products is trying to assemble more critical mass,'' said Eric Bosshard, an analyst with Midwest Research/Maxus Group of Cleveland. The deal also means Newell is admitting it does not have enough market share in the container market, according to Bosshard.
Home Products expects to complete the deals by the end of September, about a year after its planned merger with Israeli plastics housewares maker Zag Industries Ltd. fell through. Late last year it bought Seymour Housewares Corp., a laundry products manufacturer that uses little plastic.
Home Products Chairman and Chief Executive Officer James Tennant said in a telephone interview that Newell Plastics will launch his firm into food-storage containers, a market Home Products has coveted. Newell Plastics comprises Anchor Hocking Plastics Inc., a St. Paul, Minn., food-storage container molder for consumer markets, and Plastics Inc., which molds food containers, bowls and cups for institutional markets and specialty party retail stores such as Party City.
Newell Plastics President Frank Biller said Anchor Hocking Plastics still plans to go ahead with a two-plant consolidation into a new, 370,000-square-foot facility in St. Paul by next spring. Newell Plastics also plans to enter disposable plastic cutlery under its new owner, he added. Biller and other Newell Plastics management will continue with the operations after the sale.
Anchor Hocking Plastics is the second-largest producer of food-storage containers sold to retailers in North America, according to two main competitors. It introduced the concept of selling containers in multipacks.
Rubbermaid Inc., the largest food container player, also has been selling multipacks and boxed sets with different sizes and this has helped it recapture market share, according to spokeswoman Lorrie Paul Crum.
The Tenex line of closet and other containers will complement Home Products' Tamor division's presence in home storage goods. Home Products will buy Tenex's molds but no other machinery from its two plants in Elk Grove, Ill.
Tenex CEO Albert Cheris said the sale will allow his firm to focus on its core business of office and home office products in global markets. Tenex does most of its own molding and has distribution facilities in Illinois and the Netherlands. The company exports much of its production, Cheris said. Consumer storage items are a ``relatively small part'' of Tenex's overall sales.
Cheris said Tenex's consumer storage operation has been growing 50 percent a year since it was formed five years ago. Its office products business is growing even faster, he said.
Tennant said Home Products will consume much more than 100 million pounds of resin annually after it completes the purchases.
``At the end of the day we are a housewares company and we never can get away from plastics,'' he said. Home Products and the businesses to be acquired all sell to mass merchandisers.
Home Products reported half-year sales of $107.4 million, up 66 percent from last year. Profit for the six months ended June 27 soared 139 percent to $4.3 million. It predicted the purchases will immediately boost earnings and sales. Standard & Poor's placed Home Products' credit and debt ratings on CreditWatch because the acquisitions probably will make it highly leveraged.